Capacity across a portfolio
Will this purchase block the next one?
Lenders differ enormously in how they assess existing debt. Choosing the wrong lender now can quietly close off your borrowing capacity for the following purchase.
INVESTMENT LENDING
Lending for property you buy to hold
How lenders assess rental income, why investment loans price differently, and what structure protects your next purchase.
IN SHORT
An investment loan is assessed on two incomes, not one
When you borrow against an investment property, the lender considers both your personal income and the rent the property is expected to produce. Most lenders do not count the full rent — they apply a discount to allow for vacancy, management fees and maintenance.
Investment loans are usually priced slightly higher than owner occupier loans, and the gap widens for interest only repayments. Policy also tightens: some lenders limit exposure to certain postcodes, apartment sizes or building types.
If you intend to buy more than one property, how you structure the first loan matters a great deal for whether the second is possible.
WHY IT HELPS
Where a broker earns their place
Property acceptability
Will the lender accept this property?
Small apartments, serviced units, rural blocks and some high-density postcodes are restricted or excluded by particular lenders. Knowing that before you sign avoids a failed approval.
Keeping securities separate
Are your properties tangled together?
Cross-collateralising loans across properties makes it harder to sell or refinance one without disturbing the others. Standalone structures usually age better.
HOW IT WORKS
How lenders actually run the numbers
Serviceability for an investment purchase is not simply salary plus rent. The lender adds a buffer above the actual interest rate, discounts the rental income, applies a minimum living expense benchmark, and assesses existing debts on its own assumptions.
- Rental income is typically shaded to allow for vacancy and costs
- An assessment rate above the actual rate is applied to all debt
- Negative gearing benefits are treated cautiously, if counted at all
- Existing loans elsewhere are assessed at the lender's own rate, not yours
- Loan structure influences how much capacity survives for the next purchase
IS IT RIGHT FOR YOU
Investment lending in practice
This tends to suit you if
- You have equity to draw on — existing property equity can fund a deposit without selling.
- Your income is stable and documented — which keeps the widest range of lenders available.
- You are planning more than one purchase — structure set up now protects later capacity.
- You hold a maintenance buffer — vacancies and repairs are when investors get caught short.
Worth weighing up
- Investment pricing runs higher — particularly on interest only repayments.
- Not every property is acceptable security — size, type and location restrictions vary by lender.
- Rent is not guaranteed — vacancy, arrears and rising costs all hit cash flow.
- Tax outcomes are not our advice — your accountant should confirm the position before you rely on it.
How working with us actually goes
Step 1
We start with a conversation, not an application
Step 2
We work out what you can borrow and what it costs
Step 3
We prepare the application and deal with the lender
Step 4
We stay across the loan long after settlement
COMMON QUESTIONS
Questions we get asked about this
How much of the rental income will a lender count?
Most lenders count a discounted portion of the gross rent rather than all of it, to allow for vacancy periods, management fees, rates and maintenance. The exact treatment varies between lenders.
Where the rent is not yet established, lenders generally rely on a market rental assessment prepared as part of the valuation.
Can I use equity in my home as the deposit?
Often, yes. Releasing equity from an existing property can fund the deposit and costs for the next purchase without you selling anything.
How that release is structured matters for both flexibility and tax deductibility, so it is worth setting up deliberately with your accountant across the table.
Is interest only better for an investment loan?
It is common, because it preserves cash flow and, where the debt is deductible, keeps the deductible balance intact. It also means the loan balance does not reduce, and repayments increase when the interest only period ends.
Whether it suits you depends on your cash flow, your tax position and your plans for the property. This is a question for your accountant as much as your broker.
What is cross-collateralisation and why avoid it?
Cross-collateralisation is when one lender holds several of your properties as security for several loans, tied together.
It can simplify an approval in the short term, but it makes selling or refinancing a single property more complicated, because the lender must reassess the whole arrangement. Standalone security is usually preferable where it is achievable.
Will buying an investment property stop me buying another?
It can. Every loan you hold reduces assessed capacity, and lenders assess existing debts using their own buffered rates rather than what you actually pay.
Sequencing purchases and choosing lenders in the right order is a genuine part of the strategy for anyone planning to build a portfolio.
RELATED
Where people usually go next
GET IN TOUCH
Find out where you stand before you commit to anything.
Would rather talk it through?
(02) 9659 1694Important information
We provide credit assistance. We are not tax agents or financial advisers, and nothing here is tax advice. Speak to your accountant or a licensed adviser about negative gearing, deductibility, depreciation and capital gains before making a decision.
The information on this page is general in nature. It has been prepared without taking your objectives, financial situation or needs into account, so it is not personal advice and you should consider whether it is appropriate for you before acting on it.
Any rates, figures or examples shown are indicative only. Lending is subject to approval, and lender eligibility criteria, terms, conditions, fees and charges apply. Talk to us about what your own circumstances allow.